Scottish co for market-based pricing to attract IOCs to explore oil, gas in Bay

The Scotland- based Wood Mackenzie has suggested the Petrobangla to link its gas-purchase price with the LNG price in the international market to attract international oil companies (IOCs) to explore hydrocarbon in the Bay of Bengal.
The three recommendations are (i) link the gas-purchase price with the LNG price in the international market, (ii) increase IOCs profit on gas and (iii) waive the corporate tax from the IOC's in doing their business here along with some other recommendations, according to the Energy division.
"Bangladesh's economy cannot be affording the first recommendation of consultant as it suggested linking it with the LNG price. Usually, Brent crude price on the international market is set as the benchmark for fixing price of the natural gas, however if we want to make it more lucrative we can take the Japanese "S" curve formula but I did not suggest to link up it with LNG price as it would be a huge burden for Bangladesh," former energy adviser of the caretaker government Dr M Tamim said.
He suggested that the Petrobangla could take the other two suggestions of the consultant. Earlier, Petrobangla has paid the corporate tax of the IOCs
and about the fifty percent share ratio�it is not a bad idea, as we are now sharing 50 per cent of Chevron's gas, he added.
If fixed in this market-based pricing formula, the new gas price for deep-water offshore blocks will be around 31 per cent to 38 per cent higher than the current price offered under the existing model production-sharing contract (PSC) 2019.
A Petrobangla team lead by the Director PSC (Production sharing contract)  Shahinul Islam is working on the report, whatever report we have received we are trying to make it realistic, the official added.
Meanwhile, this is the first time Petrobangla has engaged a global consultant to prepare the Model PSC, to make the next round of offshore-exploration bidding an attractive one as the PSC prepared in 2018 has failed to draw the IOCs attention.
"Yes, Wood Mac has given us three specific recommendations to make our Model PSC more attractive, competitive and internationally acceptable for oil-and- gas exploration and development," a senior Petrobangla official told the Daily Observer on Saturday.
"We are working to fix the new formula so that the price comes out between US$9.5 and $10 per Mcf (1,000 cubic feet)," says a senior Petrobangla official.
In the existing model PSC of 2019 natural gas prices for the IOCs are pegged to high-sulfur fuel-oil (HSFO) prices on the global market.
For shallow-and deep-water offshore blocks the ceiling price for HSFO is $215 per tonne, in accordance with the model PSC 2012.
The floor price in the model PSC 2019 and model PSC 2012 was same at $100 per tonne.
Sources say under the existing MPSC 2019, the gas price for deep- sea blocks was set at around $7.26 per million British thermal unit (MMBtu),the offshore gas price was set to increase every year by 1.5 per cent from the date of first gas production, according to the latest Model PSC.
"We have planned to launch a fresh bidding for hydrocarbon exploration by the IOCs in both deep-and shallow-water offshore blocks by December 2022," Petrobangla Chairman Nazmul Ahsan said.
He said Petrobangla is working to update the model PSC to ensure participation of a good number of IOCs in the next bidding round.
Petrobangla previously had floated the last bidding round nine years back in 2012 through which three shallow-water blocks and one deep-water block were awarded to contractors.
Four IOCs have active PSCs, either individually or under joint venture, to explore three shallow-water blocks for offshore exploration. These are ONGC Videsh Ltd (OVL) and Oil India Ltd (OIL), are jointly exploring shallow-water blocks SS-04 and SS-09. Singapore's KrisEnergy is producing natural gas from Bangora field under block 9.
US oil-major Chevron is active in exploring and producing natural gas in three onshore gas-fields under onshore blocks 12, 13 and 14.
Bangladesh currently has a total of 26 open blocks in offshore areas, of them 11 located in shallow water and the remaining 15 are in deep water.